UPS rolls out new rates for various service offerings

Earlier this week, Atlanta-based global freight transportation and logistics services provider UPS rolled out rate increases for several of its service offerings.

One of the announced increases is for its U.S. Ground Domestic, UPS Ground Saver Fuel Surcharge, and U.S. Domestic Air Fuel Surcharge, which will go into effect on May 26.

For UPS Ground Domestic and UPS Ground Saver, the average price per gallon at least $2.29 but less than $2.47 will have a 17.50% surcharge, with that scale rising per $0.25 for every $0.18, up to a 20.50% surcharge for an average price per gallon at least $4.00 but less than $4.09. For UPS Domestic Air, there is a 16.50% fuel surcharge for an average price per gallon at least $1.39 but less than $1.48, with that scale rising up to 19.50%, for an average price at least $2.31 per gallon but less than $2.36 per gallon.

Addressing the changes in the UPS fuel surcharges, Shipware’s Paul Yaussy said the following in a LinkedIn post, “This time, fuel is increasing another full basis point. For example, today's ground fuel surcharge is 18%, but next week it is moving to 19% even if the National US Average On-Highway Diesel prices do not change. I've lost count, but this is at least the 9th fuel increase in the past 2 years.”

And effective August 17, new Domestic Large Package Surcharge (LPS) and Additional handling charge will go into effect, including: LPS will no longer be applied to Domestic Packages based on length plus girth; Domestic Packages with a cubic size greater than 17,280 cubic inches will be subject to LPS; Domestic Packages that weigh over 110 lbs will be subject LPS; and Other factors currently used to determine LPS applicability will remain unchanged.

For Domestic LPS commercial packages, the charges, based on weight, cubic size, and length, are: $205 for Zone 2; $225 for Zone 3-4; $250 for Zone 5-6, and $260 for Zone 7+. And for Domestic LPS Residential packages, the charges, based on weight, cubic size, and length, are: $240 for Zone 2; $260 for Zone 3-4; $297.50 for Zone 5-6; and $305 for Zone 7+.

UPS is also rolling out a Surge Fee, which was implemented on May 18 and remain “in effect until further notice.”

These new charges, which apply to shipments originating from the United States and heading to Canada, include: a $1.25 per pound surge fee for UPS Worldwide Economy; $0.49 per package for UPS Standard to Canada; and $0.49 per pound for UPS Worldwide Express, UPS Worldwide Saver, UPS Worldwide Express Plus, UPS Worldwide Expedited, and UPS Worldwide Express Freight.

On the company’s first quarter earnings call last month, UPS CFO Brian Dykes said that uncertainty in the market began impacting consumer behavior, adding that total quarterly U.S. average daily volume (ADV) was down 3.5%, ground average daily volume decreased 2.5% year-over-year, and total air average daily volume was down 9.6%.

“Within ground, our new economy product called Ground Saver, which replaced SurePost, had an ADV decline of 8.4%, primarily due to pricing actions we took to grow yields on e-commerce volume,” said Dykes. “This is the first ADV decline we've seen in this product in five quarters as we have leaned into revenue quality. For the quarter, B2B average daily volume was up 1.5% compared to last year. Growth was driven by returns, which increased 8.8% year-over-year. We also saw ADV strength from healthcare and high-tech customers. B2C average daily volume decreased 7% year-over-year, driven by our managed decline in volume from Amazon, our focus on revenue quality, and some demand softness.”

Dykes added that in the first quarter, U.S. Domestic revenue per piece increased 4.5% annually, marking the strongest revenue per piece growth rate UPS has seen in eight quarters, adding it partially offset declines in volume. He also noted that the combination of base rates and package characteristics increased the revenue per piece growth rate by 240 basis points, while the net impact of customer mix and product mix increased the revenue per piece growth rate by 170 basis points, and fuel drove a 40-basis point increase in the revenue per piece growth rate.

Industry stakeholders have told LM that surcharges are increasingly viewed as a lever that carriers are heavily utilizing to improve revenue yields—especially with package volume growth a major issue for most carriers. What’s more, they maintain that in general, at a macro-level, the current rate and pricing environment is more favorable for shippers than carriers. This is being driven by supply exceeding demand, leading to excess capacity in many parcel networks, with carriers utilizing dynamic pricing and surcharges to maintain yields.

Jerry Hempstead, president of Orlando-based Hempstead Consulting, was blunt in his assessment of UPS’s rate increases, in terms of what they mean for shippers.

“Why are they doing this in the middle of the year? Because they can!” he said.

“In a landscape that for all intents is a duopoly, the carriers telegraph to each other what they expect the other to do. So, I fully expect the [FedEx] to match this increase as quickly as they can after they dissect these increases. Unfortunately, there is little the shipper can do if in fact both carriers enact these changes. When one’s contract comes up for review you can add these surcharges to items for which you would like relief from all or part. Add it to the list.” 

Please click here for a complete list of the new UPS rates, in the “New Rates Announced” section.